Extract from an article by Annette Ebright
Caveat emptor: literally, “let the buyer beware.” It’s as modern-day day M&A transactions as it was in the markets of ancient Rome. In addition to financial and commercial diligence, an M&A buyer routinely undertakes a traditional legal review of its target. But there are a host of sometimes overlooked compliance areas where issues lurk that can add significant risks for acquiring companies—even when the deal otherwise makes great business sense. Compliance with international anti-corruption laws, U.S. immigration requirements, U.S. health care laws, and U.S. trade laws are examples of such areas that buyers ignore at their peril.
Conventional wisdom suggests that buyers can avoid a target’s hidden liabilities by structuring the acquisition as an asset, rather than stock, purchase. But caveat emptor; even in an asset purchase, there are situations where the purchaser can end up stuck with responsibility for the compliance failures of the seller.